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With bitcoin use on the rise, African countries eye regulations

Olusegun Abolaji Ogundeji | Sept. 23, 2015
The Nigerian central bank is set to propose new rules

Bitcoin

The increasing use of bitcoins in Africa has prompted a growing chorus of government officials, legal experts and e-commerce entrepreneurs to call for the virtual currency to be regulated.

In Africa’s largest economy, Nigeria, outlets like leather goods site Minku are now accepting bitcoins. South African bitcoin exchange BitX , which also operates in Nigeria, recently partnered with mobile payment and smartcard company Zazoo to enable bitcoin use via the virtual prepaid MasterCard app, VCpay.

"Bitcoins are becoming increasingly popular in Nigeria," said Victor Munis, a partner at international law and arbitration firm TRPLAW, via email. "A good number of Nigerians are using bitcoins for their day-to-day transactions. Private companies sell bitcoins to interested persons. Retailers are beginning to accept bitcoins as payment for goods and services."

The Central Bank of Nigeria, meanwhile, has indicated its intention to regulate bitcoin use in the country.  The deputy governor of CBN’s Financial System Stability unit, Joseph Nnanna, told a recent financial community conference that regulating virtual currencies will protect customers and investors, maintain the stability of the financial system and deter the potential use of bitcoin for money laundering and terrorist financing. The cloak of anonymity that bitcoin payments offer has made it useful to transact illegal business. For example, the Silk Road underground online marketplace took payment in bitcoins.

Munis agreed that regulating bitcoin transactions is necessary.

"Setting up the appropriate regulatory framework will not only regulate its use but also give legitimacy to bitcoin transactions in Nigeria," Munis said, "The intention of the CBN to do so is a welcome development."

Though a growing number of Nigerians use bitcoins regularly to acquire items online, many are afraid to use it because of its instability.

"Volatility does not inspire most of them to put their hard-earned money" into bitcoins,
said Tim Akinbo, CEO of Nigeria-based TimbaObjects, which develops mobile and Web apps.  Those who do use bitcoins tend to do so for quick transactions, to minimize risk from rapid fluctuations in the value of the virtual currency.

The situation is however not unique to Nigeria, according to TRPLAW's Munis. "Another country which has a notable use of bitcoins is South Africa," Munis said. "There are a number of bitcoin exchanges there. However, the South African Reserve Bank as well as its financial institutions are reluctant to accept bitcoin use. The situation may change in the future due to increasing use."

Another Bitcoin Africa Conference is scheduled for next March, following its inaugural edition in South Africa. The country also has a dedicated academy, the Bitcoin Academy, that offers courses on bitcoin basics as well as blockchain-based application development. The blockchain is a public database of transactions that can be modified by users.

 

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